Pioneer's macroeconomic and
investment perspectives

As the summer of 2013 drew to a close, the U.S. economy continued
to advance slowly, if a bit too slow at times, while the economies in
Europe and many emerging markets countries continued to deal with
various issues. In the following article, Giordano Lombardo, Pioneer's
Group Chief Investment Officer, discusses his views on the global
macroeconomic environment and certain asset classes heading into
the last few months of 2013.

Macroeconomic environment

Earlier this year, Pioneer discussed a number of factors that we believe could weigh
on the global economy and the financial markets in the next few years. We argued
that the world has become more unstable in the wake of the 2008 financial crisis
and that the reasons for the instability – including ballooning public debt in
developed countries, tireless money printing by central banks (which could
possibly lead to the creation of further asset price bubbles), and increasing, and
sometimes unnecessary, regulations – are not going to disappear any time soon.

Two new important macroeconomic developments have surfaced recently — the
debate about the so-called tapering of the U.S. Federal Reserve's (the Fed's) loose
monetary policies and the changing economic outlook in China. We believe that
the most important issue facing investors is not whether the Fed's tapering of its
quantitative easing policy will start sooner rather than later, but what will happen
to equity markets when interest rates begin to rise, probably next year.

Pioneer's views on asset allocation

At present, we are maintaining our view that it makes sense to overweight the equity
markets, particularly in developed countries. It is true that in a zero-interest-rate
environment, markets are mostly driven by liquidity, leading to higher price volatility
(making them appear riskier). With that said, we believe that "true risk" – in the sense
of potential capital impairment – can be found more in overextended bond markets
than in equities, which currently offer decent potential value over a medium- to longterm
time horizon, provided that one can withstand the short-term spikes in volatility.

As for fixed-income investing, we believe that remaining flexible is a key. We believe
duration and credit exposures in fixed-income portfolios will need to be dynamically
adjusted in order to exploit short-term cycles in interest rates, which, from current
levels, have only one direction to go: up. (Duration is a measure of a portfolio's price
sensitivity to changes in interest rates.) The "mini-turmoil" in the bond markets this
past June did not surprise us too much. Bond prices declined sharply nearly everywhere
during that period, but we were able to lessen the adverse impact on Pioneer's
portfolios by maintaining a reduced risk profile (with duration and credit-risk
exposure), thanks to our flexible approach.

During the second quarter, Pioneer progressively reduced exposures to emerging
markets-related asset classes, first on the bond side and then in equities and
commodities. At the same time, we rebalanced the risk towards developed countries,
notably to U.S. and Japanese equities. At present, we continue to prefer European to
U.S. equities as we believe the latter are becoming fully valued in relation to expected
corporate earnings.

For the time being, we prefer to remain underweight to emerging markets bonds,
which, to us, continue to appear richly valued based mainly on their relatively low
credit-risk premiums. We'd like to explore emerging markets equity opportunities on
a "value" basis and try to avoid countries or sectors where fundamentals still appear
priced for perfection. Naturally, the ability to invest in the right sectors, stocks, and
countries will remain crucial.

Effects of rising interest rates

As for the potential impact of rising interest rates on equity markets over the next 12
to 18 months, we would point out that, based on our research, over the last 40 years
inflation and unemployment factors have been responsible for roughly 70% of the
Fed's tightening moves. The remaining 30% can be explained by a variety of factors,
including the banking system's condition and bank reserves. We believe the effect of
interest-rate tightening on the market's performance has not been dramatic during that
time frame. In fact, the market experienced gains at the end of each tightening cycle

Final thoughts

We believe that equities may be able to withstand a "good" increase in interest rates
(an increase based on expectations of improved economic prospects), as opposed to
a "bad" increase (an increase due to rising inflation expectations). We do not see
an immediate inflationary risk for the U.S., but the longer-term prospects are less
certain, and we will continue to monitor the situation carefully.

The views expressed in this article are those of Pioneer Investments, and are subject to change at any
time. These views should not be relied upon as investment advice, as securities recommendations, or as
an indication of trading intent on behalf of Pioneer.

The views expressed in this article are those of Pioneer Investments, and are subject to change at any
time. These views should not be relied upon as investment advice, as securities recommendations, or as
an indication of trading intent on behalf of Pioneer.

Before investing, consider the product’s investment objectives, risks, charges, and expenses. Contact your advisor or Pioneer Investments
for a prospectus or summary prospectus for the Pioneer fund(s) covered in this material. It contains complete information on the risks, fees
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This material is not intended to replace the advice of a qualified attorney, tax advisor, investment professional or insurance agent. Before making any financial commitment regarding the issues discussed here, consult with the appropriate professional advisor.

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